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Here’s why Seattle won’t be the next San Francisco

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[See image gallery at blog.ctnews.com] No one should be shocked that Seattle home prices are shooting up in a manner that rivals — and lately, even surpasses– San Francisco. The two cities are alike in many ways, including high demand/short supply for homes. Lately, news of over-bidding madness,  the nation’s fastest-rising rents, and rapidly inflating real estate prices haven’t been San Francisco stories at all, but rather, Seattle ones. According to the Seattle Times, in July “Seattle-area home prices surged to a record for the third straight month and continue to rise faster than in all but one other major city [Portland, OR].”

Is Seattle in danger of becoming the next San Francisco?

Peter Orser, director of the University of Washington’s Runstad Center for Real Estate Studies described the cities of Seattle and SF as “blood brothers.” “I look at San Francisco as really an image of Seattle’s future because it has the same land restraints, it has the same driving economy that is hiring six-figure millennials,” Orser told the Seattle Times.

But Mike Rosenberg, Seattle Times real estate columnist, doesn’t think Seattle conditions are as extreme as San Francisco’s. He bases his argument on several factors: First, affordability. Seattle homes cost approximately half of what San Francisco’s do, “a fact that has stayed constant through housing booms and busts of the last two decades. Almost like clockwork, every time home prices have grown a dollar in Seattle, they’ve risen two dollars in San Francisco.”

Yet only 10 percent of San Francisco families pull in the required income to comfortably afford S.F.’s median home price, compared to 50 percent of Seattle families. S.F. residents typically pay 60 percent of their income for housing, while Seattle’s only spend 35 percent.

Rosenberg also points out that Seattle suburbs still offer less expensive homes for families who want to live close to, but not in, the city proper. This is stark contrast to S.F., where the suburbs of the East Bay, Marin County, and Peninsula are in some cases even more expensive than the city itself.

New Construction: Seattle has us beat

Any resident of the city knows the dearth of new homes contributes to the overall imbalance in the market, whether we’re discussing renting or buying. This is not the case, or at least not so dire a case, in Seattle: “The good news is Seattle has been adding homes twice as fast as construction-averse San Francisco for the last decade, which could help stave off the extreme housing shortages that have driven up costs in California,” writes Rosenberg.

We should also examine the types of housing built. On the Block has already covered the lack of new construction in the city, as well as the fact that most new construction that does get built takes the form of luxury condos. Yet luxury condos have a limited, rarified audience. Single-family homes at entry level prices hardly exist in any form in S.F., and certainly don’t get built very often. This tweet drives that fact home dramatically:

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So it’s not always a complete lack of construction in San Francisco contributing to housing woes, but the type: The San Francisco Planning Department’s 75-page 2015 Housing Inventory report (released on May 27, 2016),  shows the vast majority of new building in SF is multi-unit buildings of luxury condos. This type of housing and its price point have not done much to even out San Francisco’s imbalance of supply and demand.

The gallery above highlights new construction in S.F. vs. new construction in Seattle. It’s hard to look and not see some justification for Mike Rosenberg’s proclamation that “Essentially, San Francisco has become almost exclusively for the rich, while Seattle is a place where it’s difficult but still possible for the middle class to thrive.”

Anna Marie Erwert writes from both the renter and new buyer perspective, having (finally) achieved both statuses. She focuses on national real estate trends, specializing in the San Francisco Bay Area and Pacific Northwest. Follow Anna on Twitter: @AnnaMarieErwert

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